Location: Hickman County, KY | Metro: Graves County, KY
Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)
| Unit Size | Monthly FMR |
|---|---|
| Studio | $650 |
| 1 Bedroom | $690 |
| 2 Bedrooms | $910 |
| 3 Bedrooms | $1,210 |
| 4 Bedrooms | $1,260 |
| 5 Bedrooms | $1,462 |
| 6 Bedrooms | $1,637 |
| 7 Bedrooms | $1,768 |
| 8 Bedrooms | $1,856 |
Zillow median home prices vs Section 8 FMR rates (Data: 2026-08-31)
| Bedrooms | Monthly FMR | Median Price | 1% Rule | Grade |
|---|---|---|---|---|
| 2BR | $910 | $79,105 | 1.15% | B |
| 3BR | $1,210 | $147,079 | 0.82% | C |
U.S. Census Bureau data (2024)
Water Valley, KY, located in ZIP code 42085, is a modest-sized community with a population of 914 residents. Thirty percent of these residents are renters, indicating a significant but not overwhelming demand for rental properties. The median household income in the area stands at $57,679, suggesting a middle-class demographic. Median home values in the area are relatively low at $112,430, which reflects the affordable housing market.
Moving into the specifics of rental economics, the Fair Market Rent (FMR) set by the Department of Housing and Urban Development (HUD) for the metro area in fiscal year 2026 is $870. This figure is notably higher than the current market rent, which is recorded at $746 according to the Census American Community Survey (ACS). This gap between FMR and market rent presents an opportunity for landlords and small-portfolio investors to consider adjusting their rental pricing closer to the HUD's benchmark without losing tenants.
The practical question for investors then becomes whether this place is suitable for a hands-off voucher operator or a hands-on value-add buyer. Given the lower median home values and the discrepancy between FMR and market rent, it suggests that there is potential for a hands-on approach to add value through property improvements. This could increase rental income to align with the FMR, thereby attracting more stable and subsidized tenants under the Section 8 program. For those preferring a hands-off strategy, the existing market conditions might still provide a steady stream of income, albeit at a lower rate compared to the FMR.
In conclusion, ZIP 42085 offers a balanced opportunity for both types of investors. However, for those willing to invest time and capital into improving properties, the potential for increased returns and a more secure tenant base through alignment with the FMR is compelling. Hands-off operators can also find success here, leveraging the established demand for rental properties at current rates.
Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-08-31). Demographics from U.S. Census (2024).
About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.